Opportunities and Challenges for South African Wineries
Welcome to the latest blog post, where we delve into the recent WOSA market report on the UK wine industry (October 2022 to March 2023), and shed light on the opportunities and challenges faced by South African wineries. Over the past six months, South African wines have shown positive performance, defying the overall trend in the off-trade sector. However, competition from countries like Portugal, regulatory changes, and the rise of the no and low alcohol category present both exciting prospects and potential obstacles.
#1 - Performance of SA Wine
South Africa has seen a positive performance in both the UK off-trade and on-trade, defying the overall trend in the off-trade sector. However, it should be noted that on-trade figures are still influenced by the post-covid recovery. In the off-trade, the still wine category has experienced a decline of 9% by volume and 7% by value year on year.
Practical Suggestion:
Capitalize on the positive performance in the UK off-trade sector by focusing on marketing and promoting South African wines as unique and distinct offerings. Highlight their quality, diversity, and value for money.
Explore strategies to mitigate the decline in the still wine category in the off-trade. Consider introducing innovative packaging, targeting specific consumer segments, or emphasizing the unique characteristics of South African still wines.
#2 - Competitor Intel/Insights/Analysis
Italy, Greece, UK, and Portugal have a significant presence at the London Wine Fair this year. Portugal's image in the UK is improving, and the language used to describe Portuguese wines is often similar to that of South Africa. Portugal is seen as exciting, dynamic, and offering excellent value for high-quality wines. This could create competition for South Africa in the UK market.
Practical Suggestion:
Leverage the similarities between South African and Portuguese wines in terms of being exciting, dynamic, and offering excellent value. Highlight the unique aspects of South African wines that set them apart from this competition.
Capitalize on the presence at the London Wine Fair by actively participating in the event each year and showcasing South Africa's winemaking heritage, sustainability practices, and commitment to quality. www.londonwinefair.com
#3 - WineGB and Impact on Cap Classique
WineGB is making efforts to increase sales of sparkling wines in the UK. While domestically produced wines always have their appeal, the wines are expensive. This could potentially affect the work being done to create awareness for South Africa's Cap Classique sparkling wines.
Practical Suggestion:
Strengthen the positioning of South Africa's Cap Classique sparkling wines as a high-quality and value-driven alternative to expensive domestically produced sparkling wines.
Collaborate with the Cap Classique Producers Association and engage in joint marketing efforts that highlight the unique characteristics of Cap Classique and educate consumers about its distinct qualities. www.capclassique.co.za
#4 - Market and Regulation Intel
The most pressing development in regulations is the changes to duty in the UK, which will come into effect on August 1, 2023. The final confirmation of the Alcohol by Volume (ABV) bands is still pending, but it is expected that these changes will proceed as outlined. The changes in duty, combined with the removal of the duty freeze and high inflation, have created uncertainty for retailers and importers.
Practical Suggestion:
Proactively engage with retailers and importers to navigate the changes in duty and provide support in understanding the impact on pricing and market positioning.
Stay updated on the finalization of the ABV bands and align the product portfolio and pricing strategy accordingly to minimize the impact of duty changes.
#5 - Scottish Deposit Return Scheme
The Scottish Deposit Return Scheme has caused controversy and is considered unworkable for businesses in its current form. Most major UK multiple grocers have called for a delay, and it has been announced that the scheme will be delayed until March 1, 2024. However, there are concerns that even with the delay, it may still not be ready by that time.
Practical Suggestion:
Monitor the developments of the Scottish Deposit Return Scheme and assess the potential impact on packaging requirements. Explore sustainable packaging alternatives or collaborate with packaging suppliers to ensure compliance and minimize logistical challenges.
#6 - Innovation
The no and low alcohol category has retained its value share in the BWS (Beers, Wines, and Spirits) market. It accounted for 1.8% of the total volume in the off-trade liquor market, up from 1.6% a year ago. The category is now worth £207 million. No and low spirits saw the biggest gains during the 12 weeks leading up to Christmas compared to the previous year's festive season. The consumption of no and low alcohol has increased, especially in the last two years, with more consumers opting for lower ABV offerings. There has been significant growth in the number of consumers trying to moderate their alcohol consumption, particularly among 18-24-year-olds. No and low alcohol occasions have doubled in the last two years, while alcoholic occasions have declined. Non-alcoholic still wine was the preferred alternative for consumers of alcoholic wine during Dry January. The growth in the no and low alcohol category was highest in December rather than January, and no and low alcohol beer performed better compared to wine, spirits, and cider. The desire to moderate alcohol consumption has grown across all demographic groups, with people drinking less frequently and opting for soft drinks.
Practical Suggestion:
Capitalize on the growing demand for no and low alcohol beverages by expanding the portfolio to include no and low alcohol wines. Develop innovative and high-quality offerings that cater to consumers seeking moderation and healthier lifestyle choices.
Leverage the success of Dry January and the increased interest in no and low alcohol products by actively promoting South African no and low alcohol wines. Position them as a flavourful and sophisticated alternative to traditional alcoholic wines.
Overall, the WOSA report highlights both positive and challenging aspects for South African wines in the UK market. The positive performance and differentiation from the overall trend in the off-trade sector are promising. However, competition from countries like Portugal, regulatory changes, and the rise of the no and low alcohol category present potential challenges that need to be addressed.
Reference: Wines of South Africa. (2023, May 17). Market Feedback Reports, UK. Retrieved July 3, 2023, from https://www.wosa.co.za/applications/library/file/download/1636
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